[Relevant Document: e-petition 328408, Hold a public inquiry into Government contracts granted during Covid-19.]
I beg to move,
That this House has considered the NAO report on Investigation into government procurement during the covid-19 pandemic.
It is a pleasure to serve under your chairmanship, Ms Eagle. I start by thanking the National Audit Office for its report. I also thank all those who have been working to shine a light on Government procurement during the pandemic: the Good Law Project, which is bringing forward a number of judicial reviews; reporters for Byline Times, openDemocracy, The Guardian and The Sunday Times; and the UK Anti-Corruption Coalition.
By chance, today’s debate takes place on the UN’s International Anti-Corruption Day. A number of businesses and others have contacted me in recent days to share their views and experiences, for which I am grateful. I applied for the debate to highlight the important findings in the NAO report and the serious questions that the Government now have to answer. The report sets out the facts on the tens of billions of pounds of public money spent by Government Departments during the covid-19 pandemic, up to 31 July 2020. It covers the pressure and need to procure goods, services and works quickly; the regulations that applied, or should have applied, to this frenzied procurement; and the management—or mismanagement, in many cases—of procurement risks, often including blatant conflicts of interest.
I am grateful to my hon. Friend for securing the debate. PPE Medpro was incorporated on 12 May and was awarded a contract for £122 million for single-use disposable medical robes, which it was going to import. The contract was not advertised, but the company had a link to a Conservative peer. By contrast, my constituents who own Florence Roby spent months trying to get a contract for multi-use medical robes, which can be used up to 100 times. They were given the run-around and, after months, they had to give up and lay off staff. Is that contrast not a perfect example of everything that the National Audit Office highlights as being wrong with procurement in this crisis? This is a missed opportunity to have environmentally sustainable production and value for money, with reusable, not single-use, equipment.
Thank you, Ms Eagle. I absolutely agree with my hon. Friend. Story after story has come forward in a similar vein.
Public procurement regulations are designed to safeguard public confidence in the spending of public money. On 18 March 2020, the Cabinet Office implemented emergency procedures for procurement to allow for extreme urgency, including directly awarding contracts to suppliers without competition. That guidance referred to the need to keep proper records of decisions and actions on individual contracts; to have transparency and publication requirements; and to achieve value for money—basic requirements that the report and other information in the public domain now show the Government failed to meet.
The NAO highlights that, remarkably, the Cabinet Office guidance failed to give direction on managing the risks that should be considered as a result of using direct awards. The usual Cabinet Office spending controls on contracts over £10 million were not applied to the procurement of personal protective equipment. A clearance board was later set up, with an eight-stage process to approve PPE contracts over £5 million, but we know that £1.5 billion was awarded in contracts before proper processes were in place and before any financial and company due diligence process was standardised.
By 31 July 2020, over 8,600 contracts, worth £18 billion, had been awarded, of which £10.5 billion-worth were awarded directly without competition. Under the cover of the pandemic, billions of pounds of public money was handed to private companies, including Tory-linked firms, without competition, transparency or accountability.
Does the hon. Gentleman agree that we were on daily calls at the time discussing the pandemic and how we could help our constituents and companies? People from all parties were there, including Labour Members who were rightly asking for PPE for care homes and other organisations in their constituencies.
I will move on because I want to go through the ways in which the system was set up. I will move on to some of the case studies highlighted in the report. PestFix, a pest control supplier, was handed a contract worth £350 million for PPE. The Government contracted with PestFix to purchase 25 million FFP2 masks, which we now know did not meet the Government’s published PPE specifications at the time of the order. Only after 600,000 masks were completed and delivered did the Department communicate the problem to PestFix and alter the contract.
Ayanda Capital—a London-based investment firm whose senior adviser was Andrew Mills—was awarded a PPE contract worth £252 million. At the time, Mills was also an adviser to the Board of Trade, part of the Department for International Trade. The 50 million masks purchased from Ayanda Capital failed to meet NHS specifications and were never able to be used. The deal’s documentation failed to identify any conflicts of interest.
Other cases have come to light. P14 Medical, a small firm based in Stroud, Gloucestershire, which recorded significant losses in 2019, was handed a £156 million contract to import PPE from China. Its director is a Conservative councillor. PPE Medpro, which has already been mentioned and is run by Anthony Page, a business associate of Conservative peer Baroness Mone, was handed a £122 million contract weeks after it was set up. In fact, PPE Medpro was set up on the day that Page quit as secretary of the company that deals with Baroness Mone’s brand.
In another case, Spanish businessman Gabriel González Andersson received £21 million of taxpayer’s money for acting as an agent to an American jewellery designer who, despite the absence of relevant experience, received major contracts for the supply of PPE. The Health Secretary’s former neighbour, who runs a pub in his village and has no previous experience in medical supplies, was awarded a £30 million contract to make millions of plastic vials for covid tests. He first contacted the Health Secretary by WhatsApp.
It is not just in the procurement of PPE that the Government have serious questions to answer. Some £840,000 was handed to the communications company, Public First, to run focus groups. The contract for that work was awarded retrospectively. Public First was founded by husband and wife Mr Frayne and Ms Wolf in 2016. Both Frayne and Wolf have worked in senior positions at different times for the former Education Secretary, and now Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office, the right hon. Member for Surrey Heath (Michael Gove).
The NAO stated:
“We found no documentation on the consideration of conflicts of interest, no recorded process for choosing the supplier, and no specific justification for using emergency procurement.”
The Government have tried to claim that the NAO report shows Ministers properly declared their interests and that there is no evidence of Ministers’ involvement in procurement decisions or contract management. The truth is that we just do not know what role Ministers played.
The Government’s only explanation is that this was an emergency and they were sourcing PPE as quickly as possible. Yes, the Government had to source PPE quickly—a problem of their own making. During years of cutbacks, emergency stockpiles of PPE dwindled and went out of date. The Government ignored warnings from their own advisers to buy missing equipment, and pandemic planning became yet another casualty of austerity and incompetence. It took Ministers until March to realise that the NHS supply chain, fragmented by years of marketisation, could not distribute PPE quickly enough to meet demand, which left Ministers scrambling to source PPE from elsewhere and overpaying by tens of billions of pounds.
No, I do not have time.
Despite the enormous sums being spent, PPE was still not making it to the frontline. There was a huge disconnect between the boasts being made by Ministers in Parliament and the reality on the ground, where key workers were pleading for the kit that they needed to do their job safely. We all recognised that this was an emergency, but the need to act fast does not explain or excuse the Government’s actions. It does not explain why the emergency procurement rules should have been applied to non-PPE or non-emergency suppliers, such as public relations agencies, and nor does it justify why some consultants were paid in one week what a nurse earns in an entire year. It does not explain why rules around transparency, which were not suspended by the emergency procedures, were not followed, or why the Government still refuse to reveal basic information about who was bidding for contracts and how decisions about contracts were made.
Here is where the Government’s story really falls apart. We know that dozens of experienced local suppliers that offered to provide PPE were ignored. These qualified businesses had the capacity to produce large quantities of PPE quickly, but they were overlooked for contracts while businesses that had no prior experience were deemed fit. Ahead of this debate, I was contacted by reputable PPE suppliers that say they were crowded out during the pandemic by organisations that had no history of PPE manufacture or supply, some of which we now know had existed only for a matter of weeks. One established family-run company in Merseyside was forced to lay off staff after its offer of PPE to Government was ignored and then refused, as contracts instead went to Tory-linked firms buying from abroad.
The cronyism does not stop with contracts. We have also witnessed an opaque and troubling appointment process, whereby senior figures with close ties to the Conservative party have won public jobs that are of great importance in the national response to the pandemic. I pay tribute to Gabriel Pogrund and Tom Calver at The Sunday Times for their investigation, which was headlined, “Chumocracy first in line as Ministers splash covid cash”. Their investigation really is essential reading; it is extensive, and there is not time to do it justice in this debate, but it starts with the Prime Minister’s appointment of a close family friend, Kate Bingham, who is also the wife of a Conservative MP, to head up the vaccines taskforce. There was no formal appointment process, and Ms Bingham was appointed despite being a venture capitalist who had no previous experience in the field. She herself has said that her initial reaction to the Prime Minister’s offer was to say:
“I am not a vaccine expert, why should I be the right person?”
Bingham has spent £670,000 on consultants from a small PR agency with close links to the family of Dominic Cummings. She is also facing accusations that she shared sensitive Government information at a private equity networking event in the United States.
Then there is Lord Feldman, a former chairman of the Conservative party, who was secretly appointed as an unpaid adviser to the Department of Health. He sat in on discussions between health Ministers and Tory donor David Meller. Meller was later handed a £163 million contract for PPE despite his company having no track record of producing PPE. I wonder whether Mr Meller will be making any more donations to the Conservative party any time soon—he certainly must be flush for cash.
George Pascoe-Watson and Tory peer Lord O'Shaughnessy, chairman and senior adviser of the lobbying firm Portland Communications, were appointed as advisers at the Department of Health. They quite literally split their time between advising the Government on their covid response and advising their corporate clients on what was going on in Government. Lord O’Shaughnessy took part in calls with Boston Consulting Group, a Portland Communications client, which went on to be handed a £21 million contract from Government.
Of course, if anyone has a problem with any of this, they could take it up with the Government’s anti-corruption champion, the hon. Member for Weston-super-Mare (John Penrose), who is here with us today in Westminster Hall. He is also a Conservative MP and the husband of Dido Harding, the Conservative peer appointed to head the nation’s test and trace programme. Her appointment is now facing a possible judicial review.
I thank the hon. Gentleman for giving way. He is making some important points. However, I will just say in response to the charges he is making against myself and my wife that he really ought to confirm that he is aware that the anti-corruption champion’s role has never had—since it was first created under Tony Blair—investigatory powers; those are rightly held at arm’s length from political leadership. That has always been the case, and therefore to imply that there is some sort of investigation that I should be conducting is misleading and dangerous.
Could the hon. Gentleman also confirm that he is aware that both my role as anti-corruption tsar and my wife’s role, which he has just mentioned, are unpaid and that she is not the accounting officer for NHS Test and Trace, which is a position held by a full-time civil servant?
Finally, can the hon. Gentleman confirm that since both my wife and I are parliamentarians, and therefore have to make declarations in the Register of Members’ Financial Interests, he is not implying, and would not try to imply, that either of us has gained inappropriately in any way from our respective roles?
On that last point, I can say I certainly never made that accusation. My point would be that it is inappropriate that he is in the position he is in as anti-corruption champion. How can a Conservative MP be in charge of overseeing corruption when the Government of the day is a Conservative Government?
On a point of order, Ms Eagle. It is important to note that ever since the role of anti-corruption champion was invented, it has, under Labour Governments as well as Conservative, always been held by an MP—sometimes a Minister—who is a member of the governing party of the day.
It remains completely inappropriate.
In the words of The Sunday Times authors,
“As the government mounted a war effort to combat Covid-19, it has instead resembled more of a ‘chumocracy’. This is a world in which ministers have turned to friends with links to the Conservatives.”
While the British public continue to make huge personal sacrifices, a privileged group of business people with close connections to the Government has turned huge profits from the pandemic. What is perhaps most remarkable is that Ministers actually created a VIP high-priority lane for companies bidding for contracts, which were put forward by Government officials, Ministers’ offices, MPs and Members of the House of Lords. It is not just a perception of cronyism; we now know that the system was rigged, with privileged access granted to companies with connections to top politicians. These favoured companies were 10 times more likely to be successful than those without political connections. This flies in face of one of the key principles of procurement: that suppliers should be on a level playing field. If this happened in any other country, we would call it corruption.
There can be no justification for the Government withholding the names of fast-tracked companies allowed to jump the queue, often at the expense of more proven competitors. Transparency is a fundamental principle; the public have the right to know how their money has been spent. The NAO’s investigation focused on 20 contracts, and its revelations could just be the tip of the iceberg. There must be a full independent investigation into Government contracts granted during covid-19.
More than 100,000 people have now signed a parliamentary petition calling for a public inquiry. The Government must, as a bare minimum, implement the NAO recommendations. They must end the VIP lane, if they have not already done so, and return to undertaking competitive procurement. They must publish the full details of the companies that pass through the VIP lane, and the sources of their referral. In a number of other countries, including Ukraine and Colombia, details about emergency covid contracts must be published within 24 hours. If they can do it, why can’t we?
The Government must embed open contracting systems into their procurement processes. Their forthcoming Green Paper is an opportunity to go even further, to rewrite the rules of procurement to prevent such flagrant conflicts of interest in the future. I will return to the Green Paper in a moment, but let me briefly talk about the advisory panel that is informing the Green Paper.
The Government’s procurement transformation advisory panel contains some voices that are welcome in shaping Government procurement policy—the University of Sussex’s Centre for the Study of Corruption, for instance, is one of them. However, there are serious concerns about other appointments to the panel, most notably Amazon. Amazon has already been awarded 82 central Government contracts, worth £225 million, in the past five years, and has a deal enabling local councils to buy supplies in one marketplace. The manner in which Amazon is embedding itself into national and regional public procurement is, in the words of Paul Monaghan of the Fair Tax Mark, “truly frightening”.
How can it be right that Amazon should be given such a position of influence over Government procurement policy, while raking in hundreds of millions in Government contracts itself? Considering Amazon’s record on meeting its tax obligations, why should a company that refuses to pay its fair share into the public purse be in a position to profit so handsomely from it? Can the Minister tell me by what process members of the procurement transformation advisory panel were appointed? What steps, if any, were taken to identify and address potential conflicts of interest, and will the minutes of the meeting be published?
In the same week the NAO report was published, the UN published its evaluation of the UK’s implementation of the UN convention against corruption, in which it calls on the UK to take a tougher approach to handling conflicts of interest—especially those at the top of Government. When we look at how other Governments across the world have responded, not only to covid but to procurement specifically, there is a lot for the UK to be embarrassed about. In Sweden, Slovakia, Estonia and Latvia, the number of contracts awarded using open competition went up during the pandemic.
The upcoming Green Paper is an opportunity to put in place measures that would begin to restore some trust in the system. The Government must now consider implementing end-to-end digital transparency for all Government contracts from planning through to tender, award, spending and implementation. The Government must establish an effective conflict of interest regime, including a publicly accessible database of conflict of interest declarations. To support that, they should extend the remit of the independent adviser on Ministers’ interests to give them independent statutory status, including the power to investigate conflicts of interest and to take action.
The Government should look to introduce conditions requiring companies bidding for contracts to meet the highest standards to ensure that they are providing real social value. Companies should receive public contracts only if they meet their tax obligations and environmental standards, and if they recognise trade unions.
This debate goes to the heart of a much wider malaise. For decades now, people have been steadily shut out of decisions affecting their lives. Wealth and power have become more highly concentrated in the hands of a few. Wealth translates to influence, and influence back to wealth. The revolving door between big business, media, finance and politics never stops spinning. The only way to counter that is by deepening democracy and accountability to the public at every level. The Government’s own anti-corruption strategy warns:
“Corruption threatens our national security and prosperity, both at home and overseas. Unchecked, it can erode public confidence in the domestic and international institutions that we all depend upon.”
The obscene profiteering and cronyism that has been the hallmark of the UK’s response to covid-19 has further eroded what little trust people have left in our political system. The need to challenge conflicts of interest, extend democracy and fight for a robust system of checks and balances to hold power to account has never been more pressing.
It is a pleasure to speak under your chairmanship, Ms Eagle. I congratulate the hon. Member for Liverpool, Walton (Dan Carden) on securing this important debate. I absolutely accept that there are issues, that procurement is extremely difficult and that lessons need to be learned.
I am grateful to the hon. Gentleman for securing the debate, and for the latter-day conversion of many Opposition Members to an interest in the area in question. Having sat on the Public Accounts Committee, I did not see many of them at the time, or over the past 18 months, raising this issue. However, I accept that there are issues to be raised, and I am keen to raise them. Unfortunately, while in my view the issues need to be raised in a spirit of constructiveness, that was not evident in the hon. Gentleman’s comments. They need to be understood with an acknowledgement of the context in which we work. Failure to understand those points means we will not push forward the discussion in a useful manner.
Having listened to the hon. Member for Liverpool, Walton I am afraid that the selective quotations from the NAO report, which I have also read, need to be corrected. He said that action was taken without the usual Cabinet Office spending controls, whereas, on page 11, the report states that
“we recognise that these were exceptional circumstances”.
The hon. Gentleman said that things were undertaken before any processes were standardised, yet, as the report states clearly on page 32, even before standardisation occurred civil servants were able to
“research and report on financial details of companies and the background details of company directors within four hours at the peak, and produced reports rating suppliers as red, amber or green.”
Nowhere in the report does the word “mismanagement” appear—not in any of the 48 pages.
The hon. Member for Liverpool, Walton talked about dozens of experienced local suppliers being ignored. I had similar suppliers that I was sending in, but they were not ignored. Page 8 states that
“the Department of Health & Social Care and the Cabinet Office put in place a clearance board to approve PPE contracts more than £5 million. PPE procurements were subject to normal departmental spending controls, including HM Treasury approval”.
On page 9, the report states:
“The cross-government PPE team established an eight-stage process to assess and process offers of support to supply PPE”.
The hon. Gentleman made a strong statement that the system was rigged, and yet page 9 states that both lanes, including the high-priority lane,
“used the same eight-stage process to assess and process offers.”
I was on some of the calls—with Members in this room—where we all directed statements and leads into that lane, without any expectation of favours whatsoever, but recognising that we were trying to ensure the best for our hospitals and the people on the frontline dealing with such difficult times.
In the 19 seconds I have left, the question that the hon. Gentleman failed to answer was the strategic one. In a period of emergency there is a choice: to prioritise output or process. Ideally, both would be prioritised, but if I had a choice, I would make sure that the PPE was in my hospital. I hope that some of the Opposition Members here will answer that question in the coming hour.
To listen to the hon. Member for North East Derbyshire (Lee Rowley), one would think everything was rosy in the garden—of course, it is not. The Government have adopted processes that abandon the decades-old traditions of checking value for money when spending in the private sector. How else can we explain that, for example, £95 billion of outsourcing resulted in a 20% increase in contracts, and the £14.3 billion of additional expenditure on contracts that had been let? How else can we explain that many contracts were let without tendering processes of any kind? Some £10 billion of taxpayers’ money was spent without any form of tendering at all. To rely on the process that the hon. Member for North East Derbyshire has just described simply does not convince. One billion pounds have gone to Tory chums—these are staggering amounts of money.
I know it is not the subject of the audit report, but given the facts that emerged when Carillion went bust—that the Government had abandoned any attempt whatever to monitor the delivery of the contract—it is extraordinary that no further steps have been taken to protect the public purse. This is taxpayer money being wasted on a colossal scale, and in an unjustifiable way. When we consider that outsourcing is costing each household in this country £3,500, the scale is extraordinary.
There is an old expression, is there not, about never wasting a crisis? The Tories have not wasted this one. They have handed over billions of pounds to their Tory chums in the private sector in a wasteful manner, with no real effort to monitor contracts or secure value for money. When people discover that it is costing each household £3,500, I think the general response will be that this is a massive rip-off—some would go further and suggest that our British standards of probity, which lasted for more than a century, have been abandoned and have become so corrupted as to no longer be acceptable. Whatever one’s view on that, it is hard to disagree that the Government are spending taxpayers’ money like confetti at a wedding—in a most wasteful and reckless manner.
Thank you, Ms Eagle. It is a pleasure to serve under your chairmanship.
I congratulate my hon. Friend the Member for Liverpool, Walton (Dan Carden) on securing this important debate. It is, of course, regrettable that this comes on the back of the National Audit Office investigation into Government procurement during the pandemic. The report itself, as hon. Members have pointed out and no doubt will continue to do so during this debate, is critical of the Government’s failure to guarantee transparency that should provide absolute confidence in the use of public funds.
I am sure Members from across the House will sympathise with the hand the Government have been dealt this year. No one could have anticipated a crisis on the scale we have witnessed, and it is natural that mistakes have been made along the way. However, in the interests of accountability, transparency and overall good governance, it is wholly wrong for a Government to hide behind such unfortunate circumstances while dismissing the concerns of Opposition politicians. We have asked probing questions—and yes, levelled criticisms—while seeking to provide appropriate scrutiny of and seek clarity on the decisions made in Whitehall offices. Such endeavours are prerequisites of a healthy parliamentary debate.
Despite that, it seems that the level of immaturity and arrogance that has infected the Conservative party of 2020 is tantamount to that of a petulant schoolchild: on one hand demanding praise and pats on the head for the things it gets right, while at the same time demonstrating outright dismissal when pulled up on its litany of failures. Most of my constituents work in the private sector and their livelihoods depend on it, so it is pretty galling to hear, repeatedly, the superficial retort that our opposition is based on some false hatred of anything beyond the public sector.
In a feat of human ingenuity and brilliance, we now have a vaccine being rolled out across the country. At the same time, a week is barely seen out without yet another story of Government cronyism emerging; companies with no track record or experience in delivering comprehensive outcomes on anything are awarded contracts to the tune of hundreds of millions of pounds of taxpayers’ cash. The only thing the public can visibly note as the primary commissioning criterion is the obvious and apparent connections to the governing party.
Only last week, a Government Minister, Lord Bethell, was asked directly whether the Government intended to publish a list of companies that were contracted to supply PPE as a result of the high-priority lane. Owing to the so-called “commercial implications”, the Government made clear their intention not to publish the list of suppliers. That sort of culture and practice has been heavily criticised by the NAO.
It is a pleasure to serve under your chairmanship, Ms Eagle.
The NAO report raises serious questions that the Government must address on both competency and cronyism. We have heard some of the numbers cited in the NAO report today from other Members, and they are staggering. Clearly, in the midst of a national—and indeed, an international—health emergency, where every country in the world was scrambling for supplies, standard procurement rules and processes needed to be relaxed; clearly, in such a competitive market, prices would skyrocket and some mistakes would be made.
However, the headless-chicken approach that the Government have pursued led to the procurement of millions of products that were not fit for purpose or that simply never materialised. For instance, £364 million was spent on full-body coveralls, with only 432,000 of those items delivered and used. That amounts to £840 per bodysuit, which is completely unacceptable.
We now know from the NAO report that companies placed on the VIP list were 10 times more likely to win contracts in the early months of the pandemic. There were no criteria for referrals to the fast-track lane, and the source of the referral was not always recorded, so I hope the Minister will outline clearly what criteria were used to assess offers from MPs, peers and Ministers, what processes were followed and what due diligence was undertaken on their credibility and suitability.
As we have heard already, many companies with no prior experience were awarded contracts, and others with good experience were turned down. The lack of transparency, the lack of risk management and the lack of a paper trail in relation to billions of pounds of public funds absolutely stinks.
Integrity, objectivity and accountability are among the seven Nolan principles of public life; these have been tested to destruction on numerous occasions, not least in the context of the whopping procurement decisions detailed in the NAO report. While NHS staff were wrapping themselves in bin bags and dying in the line of duty, and while schoolchildren were making DIY PPE, millions of pounds of public money was being siphoned off to inexperienced companies, many with links to the Conservative party.
Ministers must now commit to a thorough independent inquiry at the earliest possible opportunity, as the Liberal Democrats have been calling for. We should establish a cross-party committee to examine all contracts awarded for the remainder of the pandemic, not least in the roll-out of the vaccines.
It is a pleasure to serve under your chairship, Ms Eagle. I thank my hon. Friend the Member for Liverpool, Walton (Dan Carden) for securing this important debate.
From wasting taxpayers’ money on PPE that was not fit for purpose and Serco’s inept contact tracing system, to setting up a VIP procurement channel for people with political connections, this Government have disregarded their own rules, operated secretly and made dangerous decisions that have jeopardised public health. The OECD foreign bribery report found that public procurement is particularly vulnerable to corruption. It is worth bearing that in mind when we look more closely at some of the eye-watering examples that Members have set out.
No. The hon. Lady has made many interventions already. Let me tell Members here, on behalf of our key workers in Nottingham and across the country, that these dodgy dealings might feel like games to Ministers, but they have very real life consequences for people across the country. Myself, my colleagues and thousands of frontline care workers struggled during the heat of the pandemic, when it was widely reported that a lack of adequate PPE and staff testing in care homes created a major risk of the virus spreading. We were smeared in the media, including by Members on the Government Benches.
Let me state again for the record: the lucrative contracts that this Government were handing out to their pals led to failures and delays that had a direct impact on frontline workers during the pandemic. People die when the Government get these things wrong. People have died. Does the Minister unequivocally accept the recommendations of the National Audit Office report, and by what date will they be implemented?
The Government need to immediately outline a list of all contracts awarded during the pandemic that are unlawful, terminate them and procure further services by way of fair and lawful competition. Will the Minister commit to that today? Ultimately, procurement for the public sector needs to be re-established, with the reliance on management consultants scrapped. People deserve to know that their money is being spent on keeping them safe, in a way that is fair and above board. We demand action and we demand answers.
It is a pleasure to serve under your chairship, Ms Eagle. I congratulate my hon. Friend the Member for Liverpool, Walton (Dan Carden) on securing this important debate, because with every new story that emerges, the public are right to be asking questions, as this country goes through one of its most difficult times. They should not be reliant on the media or independent investigations for facts. Transparency and accountability should be coming from our Government.
This Government may have a majority, but that does not give them the right to do whatever they like. The National Audit Office investigation has rightly shone a light on what has been an absurd outsourcing strategy. In opening the debate, my hon. Friend the Member for Liverpool, Walton outlined all the usual checks and balances that were completely disregarded. The pandemic was unforeseeable, and we will not criticise people for not being able to prepare for something that we could not see coming, but a country of this advancement and with the level of resources that we have, has the ability to act quickly. It should have been able to act quicker to secure PPE and testing kits within the rules. Rather than putting our trust and money in smaller companies in this country and local actors with experience, the Government wasted millions of pounds of taxpayers’ money corner-cutting with private contractors for substandard products and services.
Gareth Davies, the head of the NAO, said:
“While we recognise that these were exceptional circumstances, it remains essential that decisions are properly documented and made transparent if Government is to maintain public trust that taxpayers’ money is being spent appropriately and fairly.”
That is a very fair statement. However, 10% of the suppliers were referred through political channels and, by contrast, only 1% of suppliers with no links had a chance of winning a contract. How fair is that? Some £10 billion-worth of contracts were awarded without competition, and almost 500 suppliers with links to politicians or senior officials were allowed to pitch directly for work.
The hon. Member for North East Derbyshire (Lee Rowley) talked about putting protection over process, but how can that be the case when, at the beginning of the pandemic, we had so many people begging for PPE and tests, while PPE and testing kits were being produced in this country? Suppliers did not receive contracts from the Government and so were forced to sell their products to the EU and other countries. The case of PestFix, which is a vermin control company, shows how bad the Government’s outsourcing has been. We really need to get a grip on this.
It is a pleasure to serve under your chairship, Ms Eagle. I thank my hon. Friend the Member for Liverpool, Walton (Dan Carden) for securing this debate. I hope that, in the short time I have, I can impress on the Government the need to acknowledge the mistakes that have been made and the lessons that need to be learned. At the end of my remarks, I will offer a constructive way forward, and I hope the Minister takes it very seriously.
There is a company in my constituency called Arco, which was founded in 1884. It is a local family-run company that specialises in safety equipment. All it does is PPE and safety equipment. It is acknowledged as being world-leading in its field, and it is the only safety distributor that has its own independently accredited testing laboratory in the UK, so it really is a world-leading expert. During the pandemic, it took the decision to prioritise its existing clients, which were healthcare institutions and food production institutions.
Arco prides itself on having incredibly high standards. Hon. Members would therefore expect that it would be at the top of the list of any Government procurement system looking for PPE distribution suppliers. In fact, if hon. Members google “UK world-leading PPE suppliers”, they will see Arco right there at the top. Sadly, during the pandemic, it found that its products were unwanted. It was floored by the Government response to creating a new procurement structure, which led to confusion. Suppliers lacked information and clarity about who they should be working with, and the failure to obtain decisions and sign-off led to failed orders.
Arco tells me that the online portal system had one single email address for all inquiries, and I have heard since that it was flooded with offers from companies all around the UK, with no real process for sifting those that were more genuine or reputable. That single point of contact did not require suppliers to provide information about their expertise, experience or record in sourcing or providing safety equipment. In fact, it seemed to lack the quality control that we would expect. No proof was required of the ability to meet obligations under PPE regulations when making offers to supply to the Government. Arco tells me that genuine suppliers were crowded out.
Arco has produced a 10-point plan with recommendations to improve the future processes and ensure that high-quality PPE is made at all times. It has written to the Government, and I will be writing to the Minister with its 10-point plan. I urge the Minister to have a conversation with Arco. Let us learn the lessons from the mistakes that have been made and ensure that they never happen again.
I thank my hon. Friend the Member for Liverpool, Walton (Dan Carden) for his excellent speech at the beginning of the debate. This is a fantastic opportunity to shine a light on this issue; sadly, the Government have been found lacking.
We know that huge sums of money have been spent since March. The National Audit Office report analyses £18 billion, but we know that the sums are even higher. Due to the economic downturn, serious financial decisions will have to be made in future to protect our public finances, yet so much has been wasted and given away to friends. The need for those financial decisions is made more pressing by the way in which the procurement decisions were made. This is public money, and our communities demand answers.
Since the report came out, the Prime Minister, Cabinet Ministers and Conservative MPs have been at pains to say that the contracts were rushed, but hon. Members should not forget that we had an exercise that showed what was needed in a pandemic. I believe that that still has not come to light. It should be brought to light now so that we can learn the lessons in advance of wave No. 3.
All hon. Members will pay tribute to the civil servants and armed services planners who played a key role in the huge logistical feat of managing. Without their efforts, where would we be? However, we can all remember the moment when we were watching on Sky News the aeroplane about to land, full of wonderful PPE from Turkey. Of course, that PPE arrived at great cost to the taxpayer, only to be found completely inappropriate and not to standard. That is just one snapshot. There has been a litany of errors, not just a few honest mistakes. It is clear that we need a new framework for procurement, particularly in advance of Brexit, after which we will not necessarily have the rigour that European law gives us.
I have three questions for the Minister. When will information relating to the remaining unpublished contracts be released? Will the Government commit to implement in full the recommendations of the NAO report on the rapid awarding of contracts? Thirdly, will the Minister commit to ensuring that all contract decisions will be covered by a future inquiry, with powers to prosecute any wrongdoing?
It is a pleasure to serve under your chairship, Ms Eagle, and I congratulate my hon. Friend the Member for Liverpool, Walton (Dan Carden) on securing the debate.
Yes, we are living through unprecedented times, but it is disgusting that this pandemic has seen the wealth of billionaires rise by a third, while the poorest and most vulnerable are left destitute. They have been evicted from their homes and had their rights at work and wages slashed, with the number of universal credit applicants going through the roof. The report has proved beyond doubt that the Tories are profiting from this pandemic by handing lucrative contracts to their mates through the back door. A total lack of transparency and adequate documentation has been laid bare. At best, it is proof of a highly incompetent Government who cannot get the paperwork right. At worst, it is a deliberate attempt to cover the tracks of cronyism, to avoid scrutiny and to withhold information from the public.
Hundreds of contracts have been fast-tracked, and sources of referrals have gone undocumented. Documents are missing, and the pattern of suppliers being awarded contracts despite poor due-diligence ratings raises serious concerns around conflicts of interest and the lack of a proper process. The staggering report has exposed the fact that some contracts were awarded retrospectively after work had been carried out, including £3.2 million paid to Deloitte in July for work that it had been undertaking since March, jeopardising outcomes and accountability. Over £10 million-worth of covid contracts were awarded directly without any competitive tender process at all. One shameful example details the Department for Health and Social Care handing a contract for testing vials to the Secretary of State’s mate after a WhatsApp exchange, despite his having no experience whatever in medical supplies.
With all this evidence laid bare in black and white, can the Minister tell me how the public can have any trust that the Government are truly making decisions in our best interests? The revelations from the National Audit Office confirm once again that the Tories are happy to shell out millions to their mates, while the rest of us are told to tighten our belts as we are forced to pick up the tab for this pandemic. The sacrifices of working people in fighting this pandemic have been immense, serving communities and keeping the country going. The outsourcing clearly shows that the Government have no concern for their responsibilities or for getting value for money for the taxpayer, with outsourcing impacting on workers. As the Government hand out contracts to outsourcing firms, can the Minister tell me how they are ensuring that the workers are protected and treated fairly?
It is a pleasure to serve under your chairmanship, Ms Eagle. I thank my hon. Friend the Member for Liverpool, Walton (Dan Carden) for securing the debate.
For the vast majority of the country, this pandemic has been an utter misery. It has been eight long months of loneliness, hardship and bereavement. For a wealthy few, however, it has been something quite different. For them, it has been opportunity to cash in on connections, and, boy, have they cashed in. Take, for example, Conservative donor David Meller, who has donated more than £60,000 to the party in the past decade, including thousands to support the leadership bid of the right hon. Member for Surrey Heath (Michael Gove), who is now the Minister for the Cabinet Office—the Department that happens to be in charge of PPE procurement. Mr Meller’s company ordinarily specialises in home and beauty products, but has now been awarded more than £163 million in PPE contracts. That is nearly a tenfold increase on its entire 2019 turnover.
Such deals are far from isolated. A small, loss-making firm run by a Conservative councillor was handed a £156 million contract to import PPE. A company run by the former business associate of Conservative peer Baroness Mone was handed a £122 million in a PPE contract just seven weeks after it was set up. A deal to hand a private equity company a £252 million contract for face masks, which were never used, was brokered by a senior adviser to the International Trade Secretary, who also happens to sit on the board of the private equity company.
The National Audit Office report found that companies with political contacts were 10 times more likely to be handed contracts than those without such contacts. The newspapers describe these dealings as “chumocracy”, and they have also called it cronyism, but if it was happening in another country, they would call it by a different name. I will leave it to the imagination of Members present and our constituents as to what that name would be.
It is a pleasure to serve under your chairship, Ms Eagle, and I congratulate my hon. Friend the Member for Liverpool, Walton (Dan Carden) on securing this vital debate. I would like to respond to the hon. Member for North East Derbyshire (Lee Rowley) by saying that many of us were not at the PAC 18 months ago because we were not in this place, and I am pleased to see so many of the new intake—at least seven of us—challenging the Government, as is our role.
The Select Committee on Public Administration and Constitutional Affairs, of which I am a member, has been looking at lessons learned from the covid response, including the appointment process of key figures in the UK’s response, and I was pleased that this point has been raised by Members. We found that there was a clear lack of due process, likely conflicts of interest, and potential cronyism. Lord Evans, chair of the Committee on Standards in Public Life, said only a couple of weeks ago during our inquiry that “urgent procedures” exist in times of urgent need, but added:
“Even if many of the people are exactly the right people, it is better if people know they are the right people because there has been proper, open competition.”
That is a key theme, whether those roles are paid or unpaid.
That theme has also come through in the NAO’s report, which is damning. It shows that contracts have been awarded without due diligence, with a lack of documentation, no clear audit trail or transparency. In some instances contracts were awarded retrospectively, for work already done. Hundreds of contracts have been fast-tracked for companies through the Cabinet Office’s VIP process, and while this may have been the same process as referred to earlier, many companies were referred by Ministers, officials, MPs and peers. The NAO found that firms in the VIP lane were far more likely to be awarded contracts than those that were not—a one in 10 chance, against a chance of approximately one in 100 for those outside the priority lane. That is disgraceful.
The sheer lack of due process has led to the waste of millions of pounds. I will not go through a list of the companies involved, because many have been mentioned already, but I just want to say that this angers me. In the public sector, we have many workers who have now faced 10 years of austerity, who cannot even justify getting Post-It notes from the store cupboard, yet this Government are mismanaging taxpayers’ money and are refusing to give public sector workers a pay rise. It is shameful.
It is a pleasure to serve under your chairship, Ms Eagle, and I congratulate my hon. Friend the Member for Liverpool, Walton (Dan Carden) on securing this important debate. I will highlight the issue of scrubs, and ask the Minister to go back to the Department and sort out the national scrubs crisis, which is still carrying on and has not been addressed properly by the NAO report. However, that report is damning about procurement processes, and highlights a failure and mismanagement of the process for procurement contracts.
At the start of the crisis, there was a shortage of scrubs, and volunteers across the country jumped into action, including in the Minister’s own constituency, in Upminster. That is understandable: there was a short-term shortage of scrubs, which was met by amazing volunteers. However, why are those volunteers still there, having to fulfil contracts from hospitals that are saying they still have a shortage of scrubs all these months later? What is happening in the procurement process that means we are still facing this?
Putney Scrub Hub is an amazing place. The volunteers who run it are incredible, and their leader is an established leader in her field of producing scrub robes. She will not go back to work: she has taken time off until this scrubs crisis can be sorted out. She is fulfilling contracts from King’s College Hospital, Central Middlesex Hospital, the West London Kidney Patients Association, Royal Brompton Hospital and Northwick Park Hospital, as well as meeting the increasing need of vaccine clinics for scrubs. What is going on with procurement? In response to a written question, I was told that NHS Supply Chain is the main provider of scrubs, so I hope the Minister can go back and ask questions of NHS Supply Chain, to find out what is going wrong. The NHS Supply Chain hotel services tower has not put out any tenders for new contracts in the past 12 months, so who are these 14 suppliers who have the contracts? Why are they not stepping up to the plate? Why are hospital staff phoning up and finding out that there is a three-month delay in getting scrubs?
Back at the hospitals and clinics, there are shortages. This means that NHS staff have to go home, or are being told to bring in tracksuits, which is very damaging to morale. Will NHS Supply Chain meet with the leader of Putney Scrub Hub to talk about what the problems are with the procurement chains? Why are there billions of pounds’ worth of contracts on one side, yet our NHS staff do not have their scrubs? Will we enable the Putney Scrub Hub volunteers to at last put down their scissors and go home?
It is a pleasure to see you in the Chair, Ms Eagle. As one of the people who originally asked the NAO to look into the handling of PPE contracts, I was of course extremely interested in what its report had to say. I asked for that because throughout the summer, suppliers contacted me as they were angry about being overlooked, especially given that they had put in many hours of work to get some of the contracts. Their anger turned to rage when they saw that some of the companies to which contracts had been awarded had no background in PPE and sometimes no background as a company at all. In fact, their chief qualification was a connection to the Tory party.
How did we get into that position in the first place? Of course, there was unprecedented demand, but it seems that the Government failed to heed their own warnings about the readiness of this country to deal with a pandemic. They ignored the recommendations of Exercise Cygnus and allowed the PPE stockpile that we did have to go out of date and dwindle—a dwindling stockpile, by the way, that we were paying a private company £11 million a year to sit on.
The way in which warnings were ignored created the conditions for the get-rich-quick specialists to thrive and for the taxpayer to foot the bill for overpriced PPE from people who had never sold as much as a pair of gloves the previous year. At the same time, companies with the contacts, experience and even the stock were given the run-around, so we had the scandal of doctors and nurses bringing homemade PPE to protect themselves, while British companies were selling their stock abroad because they could not get their own Government to take an interest in it. We then saw the absurd spectacle of a Secretary of State proclaiming on national television that help was on the way with a shipment of PPE from Turkey, most of which never arrived or turned out to be unusable. That was an international embarrassment that we must never let happen again.
When the Minister responds, will she set out exactly how many millions of items of PPE that were purchased either never showed up or were found to be unusable? Will she tell us how much of that has already been paid for and whether we have received any refunds? So far, I have not heard any contrition from the Government about the way in which procurement has been handled, and we need to hear some today, because the public will not forget the arrogance until long after the last person has been vaccinated.
It is a pleasure to serve under your chairmanship, Ms Eagle. I add my own words of congratulations to the hon. Member for Liverpool, Walton (Dan Carden) for securing the debate. In his opening remarks, he did an absolutely excellent job of dissecting the morass of contracts that have risen to public attention for all the wrong reasons and do not, on any objective measure, pass the sniff test.
We have heard much about what the report does tell us, so before the Minister responds, let us be absolutely clear about what the NAO says the report does not tell us. Page 44 of the NAO report states:
“This report should not be considered as offering positive assurance over aspects of any of these contracts which are not detailed in the report, or as offering any legal opinion on the use of public procurement regulations… We have not drawn any conclusions regarding the value for money of the procurement”.
The report was drawn up on the basis of a risk-based examination of 20 contracts, which are a fraction of the 8,600 new contracts that had been awarded by 31 July. To be clear, there is absolutely nothing wrong with taking that risk-based approach. That core analysis is done to find what issues emerge, and my goodness, what issues have emerged. It seems that the NAO knew exactly where it should be sticking its spade in the ground when it started this work.
Of those new contracts, £0.7 billion-worth were awarded through contract extensions; £0.2 billion-worth through competitive tendering; and £6.7 billion-worth through existing framework call-offs. Those contracts are not the ones that should cause anyone any particular concern. Rather, scrutiny should rightly focus on the £10.5 billion-worth of contracts that were direct awards with no competition.
Obviously, the Government have to have the ability to give direct contract awards in situations of extreme urgency, as the law allows. Rightly, however, strict conditions are attached to that. I do not think that anyone would disagree that those conditions are likely to have been met in the very early weeks of the crisis, but what came thereafter is an entirely different question. Within those contracts, whenever they were awarded, it is important to be able to get a sense of what was proportionate, where conflicts of interest may have arisen, how those conflicts of interest were managed, what steps were taken to mitigate the risks and how value for money was ensured as far as possible. All too often, as the report highlights, inadequate records were kept, which means that transparency has been diminished and, in many cases, it is not possible to demonstrate how particular decisions were reached and why.
I accept that, in cases of urgency, sometimes processes need to be circumvented. The law allows for that. Certain corners will be cut; certain niceties might be overlooked. The fact that this took place does not overshadow the many genuine efforts of Government employees to procure swiftly under conditions of urgency and great difficulty, but the importance of record keeping is absolutely key to maintaining transparency, so that we know that the right decisions were taken for the right reasons. The fact that the Government are still citing the need to procure with extreme urgency as a reason for persisting with this method of procurement, even after the summer, does not wash at all.
As we have heard, there are serious public concerns about certain contracts that were awarded. In some cases, those who were awarded the contracts were unable to fulfil them either at a reasonable price or to the required level of quality. In some cases, those who won them already enjoyed a closeness with the Government and some members of the Government, which was inappropriate at best.
It is remarkable that people with no experience of manufacturing, who were simply acting as middle men looking for a slice, could find themselves in a priority queue for consideration. The fact that there was a priority queue is a matter for concern. Although both lanes were supposed to be using the same gateway and scrutiny process, a stark set of numbers emerge from that analysis: 47 out of 493 contracts, or 9.5%, of those in the priority lane went on to secure a contract award, compared with only 104 out of 14,892, or less than 0.75%, of those in the normal lane.
Many contracts were awarded without any kind of financial due diligence being undertaken on the companies. In some cases, due diligence was done after the awards were given and came back as an amber or red condition. I accept that in times of urgency one may need to press on and take the chance. However, the further one goes into the process, the less justifiable it is to take that risk. To do financial due diligence in that way on contracts worth not only tens of millions of pounds, but in excess of £100 million, is a bit like going bungee jumping and only worrying about whether the cord is attached after embarking on the journey downwards. Frankly, it is beyond belief that this was allowed to happen.
The differentiation between the lanes was not based on evidence of any ability to deliver, nor was the aim to speed up the procurement process; it was preferential access, pure and simple. I was not the first Member to refer to suspicions of a crony virus working in Government, but the suspicion lingers. For too long, too many people too close to the centre of Government have won too many contracts, of which too few are properly documented or can demonstrate adequate value for money.
On 15 March, the Health Secretary said:
“Our approach to tackling coronavirus is to be as clear and transparent as possible—because all that matters is getting this response right ”.
In her summing up, the Minister will no doubt seek virtue in the fact that the Government were, in their own eyes, getting on with the job at an incredibly difficult time in a global pandemic. We must be clear: if that is the defence mustered for the content of this report, it is an excuse that is beginning to run on empty. The report stated:
“This has diminished public transparency, and the lack of adequate documentation means we cannot give assurance that government has adequately mitigated the increased risks arising from emergency procurement or applied appropriate commercial practices in all cases. While we recognise that these were exceptional circumstances, there are standards that the public sector will always need to apply if it is to maintain public trust.”
There is an urgent need for openness in these processes so that the public can maintain their trust in them and trust can be restored in the Government’s approach. That is why today I repeat the SNP’s call for a full public inquiry into the awarding of tenders and into those who had access to UK Government meetings preparatory to procurement awards throughout the health emergency. The Government absolutely must also accept unreservedly, without any qualification and in full, the recommendations made in the National Audit Office report. If they are to escape the suggestion that they have been allowing preferential access and enrichment to a select few under the cover of an unprecedented emergency, they can really do no less than that.
It is a pleasure to see you in the Chair, Ms Eagle. I congratulate my hon. Friend the Member for Liverpool, Walton (Dan Carden) on securing this important debate. The National Audit Office investigation into Government procurement during the covid-19 pandemic reveals a series of calamitous errors in how decisions were made and taxpayers’ money was wasted. It is imperative that Members have the opportunity to debate its findings.
I am grateful to all hon. Members who have spoken in the debate. Many important points were made. Time does not permit me to mention every contribution, but I will highlight my hon. Friend the Member for Hemsworth (Jon Trickett), who rightly raised the Carillion procurement scandal and asked why lessons do not seem to have been learned. My hon. Friend the Member for Nottingham East (Nadia Whittome) spoke from her direct experience of the consequences of procurement failure for social care staff working on the frontline. My hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy) gave the powerful example of Arco, a world-leading PPE supplier in her constituency that was ignored by the Government. My hon. Friend the Member for Putney (Fleur Anderson) raised her important work highlighting the ongoing national scrubs crisis.
The Opposition recognise that, when faced with a national emergency on the scale of the global covid-19 pandemic, the Government needed to act quickly to procure goods and services, but the National Audit Office found that, even allowing for accelerated processes, proper checks and controls were not carried out. The report states that
“procurement processes established by the cross-government PPE team enabled PPE to be purchased quickly, but some procurements were carried out before all key controls were put in place.”
Seventy-one contracts, with a total value of £1.5 billion, were awarded to suppliers before proper company checks were put in place. Even worse, some contracts were awarded only after the work had been completed, significantly increasing the risk of budget overspend and poor performance, and more than half of the £17.3 billion awarded to suppliers was awarded directly with no competition.
The report highlights the Government’s failure to set out clearly why they chose a particular supplier or how risks from a lack of competition were identified and mitigated. The National Audit Office highlighted that that was critical
“to ensure public trust in the fairness of the procurement process.”
It is clear that public confidence has been hugely damaged by this debacle.
We have contracts awarded without key controls, awarded sometimes after the work had already been completed, and often with no competition and without adequate documentation. On top of that, we find that the Government again and again awarded contracts not to trusted long-term suppliers of PPE with a track record of delivery but to companies with strong links to friends and donors of the Tory party—chaos facilitating cronyism.
With the huge gaps in transparency and company checks identified by the National Audit Office, the Government have serious questions to answer about the back door VIP special procurement route. How did it operate? Who had access? What weight was given to the individual making a referral through the route in the award of a contract? How many contracts were awarded through the VIP route without competition, company checks or adequate justification?
Reputable British firms with a track record of delivery who wanted to help at a time of desperate need such as Seren Plus—a long-term supplier of PPE to the NHS—were left to watch incredulously as inexperienced firms failed to deliver. Ayanda Capital received £156 million for PPE that could not be used. PestFix, with barely any money in the bank and no track record of providing PPE, received £160 million of taxpayers’ money, and the Health Secretary’s pub landlord received £30 million to provide vials, despite no track record in providing medical supplies.
The real bottom line in all this is that frontline staff in our national health service and social care, putting their lives on the line every single day and in desperate need of protection, did not receive the PPE they needed for weeks and weeks. We watched the heartbreaking footage of social care workers with no protection, hospital staff reusing masks and gowns, while the Government flushed millions of pounds of taxpayers’ money down the drain, employing firms with no track record, which unsurprisingly proved unable to deliver.
With procurement happening so quickly under emergency measures, the Government should have been creating more transparency, opening up to greater scrutiny, so that the public could have confidence in the pandemic response. Instead, the opposite appears to be the case. Again and again, the Government shrugged their shoulders at revelations of crony contracts and failed to make any commitment—
The hon. Lady is making a very serious allegation when she talks about cronyism, implying corruption. On the basis that the NAO report found no evidence that Ministers were involved in procurement decisions, at whom is she directing those allegations?
I thank the hon. Gentleman, my former colleague on the Select Committee, for his intervention. Cronyism and corruption are different in law. I am talking about cronyism. The important point that was made by the National Audit Office and reiterated in the debate today is that, when the Government have a scenario where normal rules are bypassed because of an emergency, it is incumbent on the Government to have absolute transparency on connections, conflicts of interest, routes taken and the reasons for decisions being made. I am sorry to tell the hon. Gentleman that the NAO has found the Government wanting. What is lacking from the Government is appropriate contrition and an appropriately transparent response to those allegations that the NAO has made.
I agree with my hon. Friend’s point. I repeat: with procurement happening so quickly, under emergency measures, the Government should have been creating more transparency, opening up to greater scrutiny, so that the public could have confidence in the pandemic response. Instead, the opposite appears to be the case. Again and again, the Government shrugged their shoulders at revelations of crony contracts and failed to make any commitment even to publish a full list of the companies awarded contracts under the VIP route.
I ask the Minister to answer the following questions in responding to this debate. When will the Government publish a full list of all the companies awarded contracts under the VIP route? Will she explain why the Government again and again failed to meet the requirement to publish contract awards within a timely manner during the pandemic? That was an obligation that was not relaxed by the emergency legislation. Will she explain why trusted British firms were bypassed in favour of companies with no track record of delivery? Will she commit to a full investigation of the extent of cronyism in procurement throughout the pandemic? Most importantly, will she set out what the Government now intend to do to rebuild the trust and confidence of the British public and British businesses in their broken approach to procurement?
It is a pleasure to serve under your chairmanship, Ms Eagle. I thank the hon. Member for Liverpool, Walton (Dan Carden) for tabling an incredibly important debate, and all those making contributions today. I am also grateful to the NAO for the report. The care with which we spend taxpayers’ money matters very deeply to public confidence in Government.
I do not wish this morning to present a carefully constructed political argument that seeks to dismiss the concerns that have been raised. I want instead to be candid about the challenges the Government had to navigate at the height of the pandemic, provide some context to the NAO’s report, and set out what went well and what undoubtedly could have been done better in the period it focuses on, between January and July.
I was on maternity leave at the height of the pandemic and only began my ministerial role in the Cabinet Office in June. As I took on that role, I confess I shared some of the concerns that have been raised with me in the House about the cost and the circumstances of particular procurements. I wanted to assure myself of what had happened and to get a sense of the full story. Today, I hope to share some of that and to be as transparent as possible, but as I do so, I ask hon. Members to keep three broad points in mind.
First, it is very important to recognise the sheer volume of procurement activity in response to this national health emergency. By 31 July, more than 8,600 contracts worth £18 billion had successfully been awarded, some 90% by the Department of Health and Social Care in value terms. That compares with 174 contracts worth £1.1 billion awarded by that Department last year. In other words, there was a colossal upscaling of effort to take this country through this crisis. Of those contracts, the NAO’s report examined just 20. It obviously focused on the contracts that attracted most public interest.
Secondly, due to time pressures, I am afraid I will be unable to address all the comments. I will focus my contribution on the areas looked into by the NAO report. Finally, although it has become a political cliché to say that we have to learn the lessons from particular events, in this case it is especially important that we learn the right lessons. It might make for a snappy headline or an eye-catching political campaign to suggest that the story of procurement during the crisis has been one of Tory corruption, but it behoves us all to understand what really happened, so we do not overlook what needs to change.
At the height of the crisis in April, as the NAO described in its report, health services across the world faced an unprecedented situation where demand for PPE and other medical products far exceeded supply. Faced with these exceptional levels of global demand, the usual vendors in China who service the central procurement function of the NHS very quickly ran out of supply and the world descended on a few factories in that country to bid for available items. In that market context, the Government needed to procure with extreme urgency, often through direct award of contracts, or we risked missing out on vital supplies. It is here that I would like to address the first of several criticisms being repeated here today: that the Government ripped up procurement rules. That is simply not true.
Regulation 32(2)(c) of the Public Contracts Regulations 2015, which predate the pandemic, explicitly allows for emergency procedures, including direct award. No rules were suspended, relaxed or changed. This was just a case of using existing legally compliant regulations for the purpose for which they were intended. Similar approaches were taken by countries such as Japan, New Zealand and Finland.
In a situation of genuine crisis and extreme emergency, when we had to accept or reject offers in a matter of hours or days, it was simply not viable to run the usual procurement timescales, even if we took advantage of accelerated processes, which still require a minimum of 25 days. Hon. Members will recall that everybody in this House was saying, “Get hold of the kit,” including the Leader of the Opposition.
Nor is it the case that the Government cast aside value-for-money considerations. All offers went through the same eight stage assessment process, and where full competitions for PPE were not possible because of time pressures, we examined prices against a rolling benchmark of prices to protect the taxpayer from mispricing. That is not to say that prices were not higher across the board. It was a massively overheated spot market. Product was often going for more than five times the normal price, and that was made worse by the appearance of opportunistic middlemen, who appeared and started to put down deposits on product, then reselling it for very high handling fees.
Of course, the Government would not normally pay those kinds of fees, but procurement teams were left with some very difficult choices. Either we bought the product, as was rightly and vociferously demanded, or we did not get hold of it for the NHS.
This situation was further complicated by what was going on internally, and that is what I mean when I say we have to make sure we learn the right lessons, particularly about the challenges within our own systems. Some 450 people from across government were moved into the DHSC to become a stand-up virtual team to urgently assist with securing PPE. That team is normally only 21 people-strong. In many ways, getting that number of people together was a great feat, but it also meant that there were a lot of people who did not know each other, all working remotely suddenly from home, on a range of different IT systems, with suppliers they did not know, on product with which they were not familiar, in the most highly pressured market of their careers. That was not an easy operating context.
As concern grew about the level of PPE that might be required to deal with the challenge of covid, the Prime Minister put out a call to action, which I am sure hon. Members will all recall. With great commitment and energy, the British public and the business community responded, but that meant that, in very short order, commercial teams were dealing with more than 15,000 offers of help. Frankly, leads were coming in faster than they could be processed, and when they were rejected or if they were delayed, people started chasing through their MPs. I am sure that many of us in this room experienced that.
In order to manage the influx of offers, a separate mailbox was set up to handle this area of work. That is the oft-cited high-priority lane, which the Opposition have sought to portray as much more sinister than it actually was. Far from being a secret referrals lane, that mailbox was in part a triage for directing more credible leads, and in part an engagement communication tool for managing some of the correspondence that was coming from parliamentarians of all colours, including Opposition MPs and peers. As the NAO said, it was right that we sifted the credible PPE offers from the others. The most important thing to note, as the NAO does in its report, is that all PPE offers, no matter where they came from, went through the same eight-stage check, so there was no special treatment for friends of Ministers.
There has been excitable public commentary, which has been repeated here today, and claims that people were 10 times more likely to get through if they had Tory friends. If anything, the fact that that mailbox had a higher conversation rate demonstrates that the initial triage process was working, as those leads were often more credible and proved fruitful once they had gone through the due diligence process. Even so, it is important to note that, of the 493 offers that came through the priority mailbox, only 47 were taken forward. In other words, 90% were rejected. Indeed, more than 20,000 individual product offers were rejected between the end of March and mid-June because of the robust due diligence processes that had been put in place by our commercial teams.
A number of Members have referred to companies that missed out, and a number of vocal companies have gone on television to say that they do not understand why they missed out. The Government do not have a right to reply in those circumstance, because if we were to set out publicly why that company did not secure a contract, we would be betraying commercial confidences.
The existence of the separate mailbox has added fuel to the fire for those accusing the Government of chumocracy, but if they have read the NAO’s report they should have noticed the conclusion, which has been mentioned by other hon. Members and states that
“ministers had properly declared their interests, and we found no evidence of their involvement in procurement decisions or contract management.”
Our own internal audit on PPE has not found any conflicts either, and we have been searching for them.
I am afraid I am really short of time. Forgive me; I want to get through the content.
As I say, no PPE contracts were awarded by reason of who referred them. I remind colleagues that, ultimately, there was very little waste. Of all the product in question, so far only 0.5% of what was ordered was found to be unusable. That is not to say that we cannot improve. Admittedly, there was not an adequate stockpile, and the lack of a central stock control system made it very difficult to get a clear grip of the demand signals coming in through the NHS. That is an extremely important issue to rectify.
I am so sorry; I would really like to make progress.
We have also had to rapidly address a strategic over-reliance on China. We have now built up our national capability and resilience, with the potential for 70% of PPE to be produced in the UK. I hope that those lasting national enhancements will be bolstered by the work of the Department for International Trade’s Project Defend, which is looking at other areas where we are critically dependent on other countries for important parts of our manufacturing.
The NAO was absolutely right to identify delays in publishing documentation in relation to emergency procurement. The sheer pace of activity meant that documentation was not perfect. The result is that contracts have not been published online as quickly as they should have been, and it has been left to DHSC to piece together relevant paperwork from the different IT systems, partly because of the large team that had to be brought in from outside DHSC. I very much regret that that lag in our normal transparency timescale has created a sense of mistrust, but we are nearly there. At the time that the NAO did its scrutiny work, only 50% of required contract notices had been published. As of 3 December, it is now 96% of PPE contract award notices on Tenders Electronic Daily, which is the European journal, and 94% on Contracts Finder.
I have concentrated today on PPE, as that is a large focus of the NAO’s two most recent reports. However, the NAO also looked at communications contracts, which the hon. Member for Liverpool, Walton referred to, so I would like to spend a moment on that. For context, a number of external research agencies were engaged by the Cabinet Office’s comms unit to test the public reaction to Government messaging on public health. That was crucial to helping us understand people’s attitudes and behaviours during this time and refine public health messaging accordingly to drive behavioural change.
At the time I began my ministerial role, there were reports suggesting that some of those contracts for comms services had been improperly let, and naturally I was unhappy to hear that. Unfortunately, I cannot comment in detail on the specifics of those contracts because the Department is still working on a detailed defence and disclosure in the ongoing judicial review proceedings. However, I can say that following a preliminary internal fact-finding exercise, the Cabinet Office resolved to delve into that properly and commissioned an independent expert review, led by Nigel Boardman, who sits in the Department for Business, Energy and Industrial Strategy and is also a well-respected legal professional, to consider those findings and set out how we could improve, particularly looking at the processes and guidance that teams in the Cabinet Office have access to. The review and its results were published yesterday on gov.uk. The report is forensic in its analysis and hard-hitting in its recommendations. I am pleased to tell colleagues that we will take forward all 28 recommendations in full.
Before I close, I want to say a little about the wider civil service reforms that we are proactively pursuing to address some of the concerns beyond the NAO report. During this time of crisis, people have been concerned about the use of consultants. We are looking at how we can better skill-up civil servants, reduce our reliance on consultancy, and potentially have our own in-house consultancy. We are also consolidating the number of IT systems used across the civil service so that it is easier to move people around internally at speed, and for those systems to be compatible. As has been referenced, we will soon launch our procurement Green Paper. I very much encourage all hon. Members to engage with the consultation process, because once we leave the transition period our country will have an extremely important opportunity to look at these issues.
The proposals have long been in development and will include specific measures to strengthen transparency, making sure that we can have a choice of direct award and more competitive tendering during crises. At the moment it seems that we have either the full-fat procurement, which is much too slow in emergency situations, or direct awards, which lead to the kinds of concerns that we have debated this morning. I know that the hon. Member for Liverpool, Walton is particularly concerned about issues of company conduct in procurement. The Green Paper will include proposals to use exclusion rules to tackle unacceptable supplier behaviour, such as tax evasion, embedding transparency by default and developing faster review methods to speed up the court process on legal challenges to genuinely improper procurements.
There is a lot to say, so I am sorry to rush through it all, but I will end by saying that the public are absolutely right to demand that we spend their money with care. I hope the proactive and candid approach that I have set out this morning is reassuring. I remind colleagues that we were procuring for a purpose, and that purpose was to get us through the pandemic. We achieved sufficient PPE for the NHS. We now have 32 billion items of PPE, with no reports of outages, and we have established a four-month stockpile of PPE from November 2020 onwards. Given the extraordinary context, that is an extraordinary feat.
Finally, I pay tribute to civil service colleagues in the commercial function. They might not be on the frontline of the NHS, but they have done extraordinary things in a very difficult operating context. I thank them for all the work that they have done.
Thank you, Ms Eagle, for chairing the proceedings, and I also thank colleagues across the House for their contributions. I do not think the issue will disappear. Too many millions of people have faced financial hardship and difficult circumstances over this past year, so there is anger out there among the public over what is seen as a chumocracy, cronyism or whatever we want to call it. We know that huge sums have been handed to close contacts of the Conservative party. Although I welcome the Minister’s reply and how she engaged with all the issues, she was not able to explain away the privileged access given to friends and chums of the Conservative party. Following this debate, we need a full public inquiry into covid contracts.
Question put and agreed to.
That this House has considered the NAO report on Investigation into government procurement during the covid-19 pandemic.